Forecasting Realised Volatility Using ARFIMA and HAR Models

Izzeldin, Marwan and Hassan, M. Kabir and Pappas, Vasileios and Tsionas, Mike (2019) Forecasting Realised Volatility Using ARFIMA and HAR Models. Quantitative Finance, 19 (10). pp. 1627-1638. ISSN 1469-7688

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Abstract

Recent literature provides mixed empirical evidence with respect to the forecasting performance of ARFIMA and HAR models. This paper compares the forecasting performance of both models using high frequency data of 100 stocks representing 10 business sectors for the period 2000-2010. We allow for different sectors, changing market conditions, variation in the sampling frequency and forecasting horizons. For the overall sample and using the 300 sec sampling frequency, the forecasting performance of both models is indistinguishable. However, differences arise under different market regimes, forecasting horizons and sampling frequencies. ARFIMA models are superior for the crisis and pre-crisis sub-samples. HAR forecasts are less sensitive to regime change and to longer forecasting horizons. Variations in forecasting performance could also be explained using differences in the levels of persistence underlying each model.

Item Type:
Journal Article
Journal or Publication Title:
Quantitative Finance
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000
Subjects:
?? HIGH-FREQUENCY DATAMARKET CONDITIONSMARKET SECTORSREALISED VARIANCEHARARFIMAFINANCEECONOMICS, ECONOMETRICS AND FINANCE(ALL) ??
ID Code:
133284
Deposited By:
Deposited On:
30 Apr 2019 13:05
Refereed?:
Yes
Published?:
Published
Last Modified:
18 Sep 2023 01:35